The trustee in the Bernard Madoff bankruptcy continued to go after more high-profile targets with the filing last night of a massive $9 billion lawsuit against the giant financial service company HSBC Holdings Plc. and related companies, as well as a number of European financiers.
In a 173-page complaint that lists a cast of characters and sometimes reads like a crime novel, trustee Irving Picard alleged that HSBC and the other defendants created a network of a dozen feeder funds in Europe, the Caribbean and Central America that passed on investor money to Madoff. The suit was filed in federal bankruptcy court in Manhattan.
In a news release, Picard said the defendants were well aware of indicators of fraud surrounding Madoff, even going so far as to hire a consulting company that twice reported serious risks to the financial service company. Picard is suing to get the money back for thousands of investors.
"Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars and countless victims sooner," said Picard, adding that the bank and the other defendants "were willfully and deliberately blind" to the Madoff scheme.
Officials at HSBC, one of the world's biggest financial service companies, couldn't be reached for comment Sunday night. A spokesman for HSBC also didn't respond to an e-mail request for comment.
Madoff's investment company collapsed in December 2008, costing investors an estimated $20 billion in cash they had entrusted to him. Madoff never invested any funds in stocks but concocted fictitious returns that he falsely reported as totaling $65 billion for his customers. He is serving 150 years in federal prison.
Among the others sued by Picard last night were Austrian financier Sonja Kohn, whom Picard described in court papers as "one of Madoff's top ambassadors and who at one point held an ownership share in Bank Medici. Picard alleged in his lawsuit that Kohn's company in Manhattan, Eurovaleur, served as an investment adviser to feeder funds. In the past, Kohn has denied any wrongdoing in the Madoff case. She also couldn't immediately be reached for comment.
According to the complaint filed yesterday, Madoff's reputation for being a whiz-kid was based on lies and that it became necessary for him to turn to foreign investors when he ran out of U.S. investors.
"Foreign investors were, in many ways, ideal targets for Madoff," the complaint stated. "The defendants . . . came to Madoff's rescue by introducing him to European-and Americaninvestors, many of whom thought they were investing in diverse and thoroughly vetted European funds, when in fact, they were simply depositing their money into the greatest fraud in history."
In the HSBC lawsuit, Picard is seeking just less than $9 billion, representing investor money fed to Madoff, including $2.3 billion in what are termed fraudulent transfers under U.S. bankruptcy law. Racing against a Dec. 10 deadline, Picard has been filing hundreds of clawback lawsuits, including some against investors in Manhattan and Long Island, to recoup money to pay back cheated investors. He is expected to file more high profile cases this week. Last week Picard sued the giant Swiss financial firm UBS AG for more than $2 billion.